From TechCatcher:

When I first began selling ebooks, there was no Kindle store; Sony hadn’t yet begun to sell ebooks, and Smashwords was not yet heard of.  So there weren’t a lot of examples for a newbie like me to follow in setting up my site.  Fortunately, I knew HTML, so I was able to design my own site.  But when it came to collecting money and sending products, I didn’t have the programming savvy (or money) to figure it out on my own.

After some research, I turned to PayPal to handle my transactions.  PayPal had already positioned itself to be able to handle online financial transactions, and to do so with a minimum of fuss at my end.  Like so many other people, I went with the PayPal solution, and later I added a third-party product that would automatically deliver my ebooks when purchased.  Money came in, books went out, and everyone was happy.

A few years later, a change in the PayPal system made my third-party software ineffective, and the system broke down.  This could have been a problem… but fortunately, other companies sold similar software, and I soon found another that would fit the bill.  In a few days, I was able to transition from one software vendor to the other with minimal fuss, and continue to use PayPal to do my transactions.

Later, when the likes of Smashwords, Amazon and Barnes & Noble made it easy to add books to their store, I hesitated in joining any of them: As I examined them, I realized that although they were indeed easy to use, there were things about their terms or services that did not thrill me; and as I had my own selling site, I had no need to rush into the arms of those whom I determined wouldn’t benefit me very much.

Other publishers, on the other hand, actually abandoned their online selling portals in favor of Amazon and others, deciding that it was less trouble for them to go with another vendor that would handle the complex IT tasks of online transactions.  They took the easy route, even as they realized it would cost them part of their profits to do so.

In recent years, ebook authors and publishers have watched as Amazon has altered contract terms, manipulated prices and forced sellers to accept changes which clearly benefited Amazon, not them.  And as authors and publishers railed against the demands of the Amazon machine, along came PayPal to dictate to sellers what kind of content was acceptable in order to use their online transaction system.  Many of them had similarly sunk so much of their systems into using these third parties that there was no easy way to simply shift to another vendor.  In these cases, “the easy route” turned out to be detrimental to their businesses, possibly to the extent of driving them out of business.

The use of third parties to provide services is not a new idea; but it has always held the same threats to those who put too many of their eggs into one basket.  All it takes is the third party’s making a major change to its operations, losing a primary capability, or even going out of business, to cripple or ruin those companies that were too closely tied to them.

And somehow, despite how often this has happened in other IT areas, the lesson rarely sticks.  In an ebook industry that has seen sellers of particular ebook formats go under, and take everything in that format with them, you would think sellers would have learned the value of diversifying their pot.  Yet right now, authors and publishers are horrified at the idea of having to find another online selling company to replace PayPal, whose ease of use has lulled many sellers into thinking they were the only game in town.  It is in PayPal and Amazon’s interests to make the customer believe that there is no place to turn; but in fact, there are other vendors, and it’s time to look them up.

It is in precisely moments like this that other companies step up to fill the gaps left by the major companies’ changes and flaws.  These companies, many of whom have been working in the shadow of the big guys, but waiting for a break that they can exploit, will be ready to grab up customers ready to switch from the bad habits of the other vendors.  Others will follow the surge and try to get a piece of the action for themselves.  And the more potential customers go with the smaller guys, the more the big vendors will be forced to look at the way they do business, and make friendlier changes designed to win their customers back.  This is the way of business, and how monopolies are often kept in check.  The result is usually a healthier market overall, and customers with more and better choices and higher satisfaction.

So, although the likes of Amazon and PayPal are presently exercising their control of the market, it is a reason to look forward to the next step: The further and healthier diversification of the market, and the benefits that should provide to sellers and consumers.  And it should be taken as a cautionary tale, a reminder to take a second thought before going the easy route, lest it come back to bite you.


  1. Good point. You’re right — PayPal has competitors you can use instead. Probably the best-known one is Amazon Payments … whoops.

    OK, maybe these near-monopolies (where a small number of big companies control the entire market) have some drawbacks. It seems to be that way in lots of industries (phone/cell service, cable TV, banks, airlines, etc.) these days — and the customer usually ends up losing (and suffering through some truly dreadful customer service).

  2. A lot of good points. I am not sure of the final lesson though. I would say that sellers have to sell in the market they are in at the time. It’s like a football team only being able to play what’s in front of them.

    It makes no sense for them to deliberately chose an inferior product or market when there is no reason to.

    I believe the real lesson is to diversify where there are insufficient players in a market. Diversification produces options and keeps competitors on their toes.

    In this case if there are competitors ready to step in – why are their names being kept so quiet ? I don’t see any mention of them in this article and surely naming them and spreading the word is yet another step in keeping the big bullies honest ?

  3. If what you want is names, try Intuit, PaySimple, 2Checkout, WorldPay,, FirstData, Google Checkout… there are others. There are also a few online payment services that specialize in erotic content, for those who have now been shut out of selling such material through PayPal. (I didn’t specifically search for them, so the list above may or may not include them.)

    I didn’t mention any specific names because I honestly don’t know how each one stacks up to PayPal, or what services they offer. (I am in the process of making a few inquiries now.) But as I said, I expect many of them will be stepping forward soon to offer their services, as well as articles that will do some of the legwork for us all.

  4. Steven,
    I looked into many of these payment services a few years ago and they all have conditions that they don’t accept payments for firearms, alcohol and pornography. Where the line between erotic stories and porn is drawn is unclear.
    In 2003/4 I set up a web site that was a NetFlix clone renting DVDs and we decided to us WorldPay to accept payments. But WorldPay would not accept us because we had a category of “adult” for our DVDs. We pointed out that these were mainstream movies that were rated 18, but they wouldn’t approve us while we had the word “Adult” on our site. So we renamed that category to “erotic”, while still listing the same Hollywood movies, and they approved us.
    So until we create some kind of internet cash, like BitCoin or” peer-to-peer PayPal” any online business is going to be at the mercy of credit card processors.

  5. Lance,
    As your WorldPay example indicates, there are opportunities to “bend” the rules and make special arrangements with vendors. Most of them are more concerned with getting sued than tarnishing their image, and if they’re willing to discuss it, you could probably find a way to accommodate them.

    And if you really want a vendor that isn’t so hard-nosed about it, try CCBill. There. I named a money-transaction vendor that does porn. (Actually, I just couldn’t remember their name yesterday. Ask me how I know of them, and I’ll take the Fifth.)

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